The prices of essential items may be rising, but at least some things are getting cheaper. Car manufacturers and dealers are showering huge discounts to attract buyers. From cash rebates of up to Rs 60,000 to gold coins, the outpouring of gifts makes you believe that this festive season is truly fortuitous.
Manufacturers are hoping it will prove auspicious for them too, given the drop in sales in recent months. Car sales, which had slowed down after the budget, fell 18.1% in August, the first time in 10 months. In another first, there are discounts on diesel cars too.
The best part? The large inventory means there won't be any waiting period for your dream car. However, not every deal or discount offer is a golden opportunity. If you look carefully beneath the polished exterior and shiny hoods, you'll find that some of these are tarnished. In the following pages we tell you what to keep in mind when you go shopping for a car.
Which car should you buy?
If you stand in front of an auto showroom, you're back to feeling like a kid at the candy store. The various models, the gamut of options and trims, the wide colour spectrum—each car seems more tempting than the other. However, you need to choose carefully since you will, hopefully, keep the car for at least five years, if not more.
Here are five questions you should ask yourself before you buy your preferred car.
What's your budget? All of us have a price range in mind when we go car shopping, but what you also need to remember is that the car is going to cost a lot more than the ex-showroom price stated in the brochure. There are sundry charges that you will need to pay. These may not seem too high individually, but add them up and they amount to 10-20% of the cost of the car, depending on the model.
These include mandatory charges, such as registration fee and road tax, or vague and arbitrary charges like logistics and handling fee. Keep a margin since you may have to pay for a charge that you may not be aware of. For instance, if you register a car in Delhi, you have to pay an MCD parking charge of Rs 2,000 for cars worth less than Rs 4 lakh and Rs 4,000 for those priced higher.
Keeping track of these extra charges is imperative if you aim to fund your purchase through a car loan since you may need to borrow more than you planned for. Commit to an EMI you can afford. Your total debt repayment should not exceed 30% of your monthly take-home pay. This includes repayment of any other loans as well as credit card payments. So, if your take-home salary is Rs 50,000, your combined EMIs should not be more than Rs 15,000.
Can you afford the car you want? An SUV might look cool, but do you really need such a big car? The purchase price of the car is only the first cost you will incur. Over the next few years, you will spend a small fortune on fuel and maintenance, so you need to make sure that you buy the car you can afford in the long run. You may need to balance driving pleasure with your financial well-being. So, an automatic transmission vehicle may be more comfortable to drive, but it will also be more expensive and a heavy fuel guzzler compared with a manual transmission vehicle.
Obviously, the size of your family will be one of the deciding factors for choosing the size of the car, but if you are on a tight budget, you could perhaps forgo some of the options and trims. Would you really want to pay Rs 15,000 extra for a rear window defogger and music system? The only difference between two of the variants of the Toyota Etios Liva—V and VX—is that the latter has bumper skirts, a roof spoiler and audio controls on the steering wheel. Yet, the VX model costs Rs 6.2 lakh, almost Rs 50,000 more than its plainer cousin. Pay additional for safety features, but for 'beauty products', it may be better to buy a lower variant and add the trims you want later. This will certainly cost you much less.
What fuels your desire? This is an oft-asked question that is tough to answer, mostly because the vacillating fuel prices keep buyers' brains spinning. So, though diesel is cheaper than petrol, the diesel cars are expensive by about Rs 1 lakh compared with their petrol variants. However, as we have often pointed out, the choice of fuel should depend on your usage.
If your daily run is about 30 km, opt for a petrol variant. Buy a diesel model only if your average daily run is more than 60 km (see graphic). Fortunately, the technological improvement in diesel engines means that their maintenance cost isn't as high as it used to be, but these vehicles are still a tad more expensive to maintain than their petrol peers. Not to forget that the high price of the diesel car will push up other charges like the insurance premium.
How's the service? The smooth running of your car will depend on how regularly you take it to the service centre. Obviously, you should ensure that the service centre is accessible and also has a good reputation. You can log in to the forums of various car websites to know how the after-sales service is or talk to the existing customers about the quality of service. There's no point driving from one end of the city to another just to get your four-wheeler serviced. A lot of service centres now offer a pick-and-drop facility, but it's advisable to be there in person to question any overbilling.
Will you get a good resale price? Sometime in the future, you might want to sell your car. If you change cars every 2-3 years, it'll be best if you buy a popular model so that you get a good resale price. A car is a depreciating asset, but the rate of depreciation varies vastly among them. "The costlier a vehicle, the faster it depreciates in value. If you lose out when you are selling the car, the big discount you are being offered today won't be of much benefit," says Jagdish Khattar, chairman and managing director of Carnation Auto.
While buying a car, figure out how much you would like to get back from it and whether the current discount will be truly beneficial in the long run. Say, you plan to buy a car worth Rs 5 lakh. You may veer towards a model (let's call it Zoom), for which you are offered a hefty cash discount of Rs 30,000, and may dilly-dally about the vehicle (we'll name it Zip), for which the discount is merely Rs 10,000. However, discounts are usually bigger for less popular models. These have a low pull factor, which is why the car company giftwraps them in lots of offers to push them in the market. Obviously, the demand for such vehicles in the pre-owned car market will also be low, and so will the resale price. So, if three years later, you resell Zoom and only get Rs 3.2 lakh, while Zip is fetching Rs 4 lakh in the used market, the great cash discount would look like a big loss, isn't it?
Negotiating the deal
Once you've decided on the type of car you want, pick out the three favourite models within that segment. Take them all for a test drive. This is an important step since you need to determine which car you can handle most comfortably. The shape of the driver's seat or the leg room at the back may seem like a minor thing now, but you could end up cursing yourself for a wrong decision when you drive for eight straight hours on the road. After you've zeroed in on the car you like, you'll have to start with the toughest job—negotiation.
Dealing with discounts: The asterisk that you see on every deal is equivalent to a kilo of salt. Doubt every 'fantastic offer' that the dealer throws your way. The most important thing to remember during negotiations is that the dealer isn't doing you a favour by selling the car and neither is he going to give you a deal that will dent his profit.
The total price cut that a dealer advertises in sparkling letters includes lots of small discounts, most of which you won't be eligible for. "Most deals are offered by the manufacturer, not the dealer. However, dealers do get decent incentives from the companies, and if you bargain hard, they may be willing to sweeten the deal by cutting a little bit of their profit," says Adil Jal Darukhanawala, editor-in-chief of Zigwheels.
You should negotiate with at least three dealers to find out which one can give you the maximum discount on the actual price of the car, exclusive of insurance, exchange bonus, loyalty, et al. Never be in a hurry to close a deal and focus only on one aspect at a time. So, if you are talking about discounts, stick to it. Don't bring in insurance or loan. The dealer may seem willing to cut down the cost in one segment, but he will slyly tack it onto other areas.
Financial fundamentals: The dealer will assure you that finance is no problem and that he will be happy to arrange it for you. Ditto with insurance. Some car companies, such as Volkswagen and Skoda, provide their own financing and these are more reliable than the ones that the dealer usually comes up with. Here's where the 'knowledge is power' adage holds true. Before you begin negotiations, find out the best loan rates and insurance quotes that you can get. There are plenty of websites where you can fill in your details to know the best possible rates.
The only disadvantage is the numerous calls you'll receive for some time from eager lenders and insurers. But it's a small price to pay to know whether the dealer is giving you a good deal or taking you for a ride. For instance, the dealer may quote a low EMI, but this could be for a long tenure, which will cost you more in the long run.
You should also check the processing fee as well as the prepayment penalty, which could be as high as 6% even if you prepay within a year of taking the loan. If you've had a long relationship with your bank and have a good credit score, try to broker a deal with it for a lower loan rate or ask if it can waive the processing fee. You will have to try out various permutations and combinations to compute the EMI that you can afford. There are plenty of online loan calculators that can help you with this.
Saving on insurance: Don't blindly accept the policy that the dealer bundles into the car's on-road price. Though there is very little difference in the premiums charged, the policy features are crucial. If you intend to keep your car for a long time, keep in mind that most private insurers don't cover vehicles more than eight years old.
When a car owner makes a claim, the first Rs 500 of the cost of repair is payable by him. You can bring down the premium by opting for a higher deductible. A voluntary deductible of Rs 2,500 could give you a 20% discount on the premium, but you will have to pay the first Rs 3,000 (Rs 2,500 plus Rs 500) of the claimed amount. "Drivers confident of their on-road skills can opt for a voluntary deductible to save on premium," says Vijay Kumar, president, motor insurance, Bajaj Allianz General Insurance.
If you are a careful driver and have accumulated a 40-50% no-claim bonus on your old car, get it transferred when you buy the new one. You will have to submit the photocopies of the sale agreement, transfer documents, insurance note and the car's registration certificate, along with a letter requesting the policy's termination, to the insurer of your old car. The insurer will issue a no-claim certificate, which gets you a discount on the new car's insurance. This no-claim certificate is valid for three years from the date of issue.
Loading up on logistics charges: This charge levied by dealers is a big bone of contention and even the Supreme Court has slammed dealers for overcharging buyers. This is usually 2-5% of the car's value. Don't be taken in by the rate list. "The ex-showroom price is what the car should cost you. Why should you pay a transit fee or warehouse charge? This charge has become a menace of massive proportions," says Darukhanawala.
Examining the extended warranty: This will depend on the car you buy. Some manufacturers provide a single warranty for three years, while others offer a warranty for two years and an extended one for another two years. "Opt for the extended warranty only if the terms are the same as those for the previous period. Will the warranty and free maintenance clause still cover total service or only the labour cost? Evaluate carefully before you pay extra," advises Khattar. Adds Tutu Dhawan, auto expert and Director of Engineers Corporation: "The make of the car will also determine the need for this. For instance, Japanese cars are well-engineered and hardly require fussing. So, you can choose to forgo the extended warranty."
Trading-in tutorial: If you want to save seconds and sweat, you could trade your old car for the new one, but be prepared to take a huge hit. Though dealers promise you an exchange bonus, they take this out from the price that they will quote you for your existing vehicle. Selling in the open market will take time, but in this case, patience will certainly earn you richer rewards. When Delhi-based Pankaj Nangia wanted to trade his eight-year-old Hyundai Xing in March this year for a Maruti Swift Dzire, the best offer he was getting was Rs 85,000. "I knew I could get more since the car was in a good condition. I went to a broker and in 2-3 weeks found a buyer who paid Rs 1.35 lakh," he says.
If you can't wait for this long, you should try to exchange the previous car for a new one by the same manufacturer since you're liable to get a better deal. This is because most of these companies have their own second-hand car dealerships and you will find it easier to sell your car through them. Another benefit is that you may get a loyalty bonus that some car companies offer. Of course, before any negotiation, find out about the resale value of your wheels. You can check out websites such as Zigwheels.com or MahindraFirstchoice.com, or even visit a few used car lots.
Avoiding unnecessary accessories: A lot of items that were earlier provided in a car's kit are now gifted to you as 'free' accessories by the dealer. A case in point is a car cover and toolbox, which were a part and parcel of four-wheelers till a few years ago. Now, the dealer will include such things in the 'free accessories' tag that is often tacked on in the overall discount that he offers. However, where you need to be more wary is if the salesperson persuades you to install extra accessories in lieu of the cash discount. Most of the accessories available with the dealers are priced much higher than those available in the open market. "This is where the dealer hits you below the belt. In the excitement of buying a new car/vehicle, one gets carried away and indulges in the goodies being offered by the dealer. However, buying from the open market is a better option as you will get more variety and at a lower price," says Dhawan.
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